Feeling the Heat

If company-specific issues are resolved favourably, long-term prospects will be good

- RADHIKA MERWIN

SATYA SONTANAM

The stock of NMDC, the country’s largest iron ore producer, has fallen by about 7 percent from our last ‘buy’ call in mid-December 2018. The fall has been in tandem with the sell-off across the metal and mining space, in the wake of trade tensions between the US and China. For NMDC, in particular, the shut-down of its Donimalai mines at Bellary, post the Karnataka government imposing conditions for extension of the mining lease, has been an added dampener. Given that the matter is pending before the Mines Tribunal, the stock could remain under pressure in the near term. The overall slowdown in the steel sector only accentuates the problem.

That said, while NMDC is likely to feel the heat in the next one year, long-term fundamentals and prospects remain intact.

Hence, investors with a long three- to five-year horizon can hold the stock. After a notable fall over the past nine months, the downside could be limited hereon, with most of the negatives priced in the stock. A favourable order leading to the opening up of the Donimalai mines can be a key positive for the stock, though restarting operations could take a while.